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Failure factors in ERP implementation

Having discussed about the success factors in the previous articles it is time to anaylze on failure factors.


    >> ERP implementation is, at its core, a people project :
 The biggest challenge before and after implementation is not the technology; the biggest issues are related to people. At every stage, companies must work harder to manage change, secure buy-in, communicate with and educate their employees. Top human resources issues are related to changing management, training and internal staff adequacy.

    >> Employee ResistanceIf the employees are not educated and informed about the benefits of the ERP system and assured about the security of their jobs by the top management, they will start believing in the rumors that float around and will either resist or sabotage the ERP implementation.

    >> Lack of top management commitment : The top management should pledge and demonstrate that the ERP implementation has its full support. They should assure the employees about their jobs, clear any doubts and explain why the ERP system is a necessity for the organization. The CEO or some senior level manager should sponsor the ERP project in order to demonstrate the management commitment.

    >> Inadequate training and education : All users of the ERP system should be trained properly in using the system to its fullest. Different groups of people in the company will have different training needs. Managers need more focus on the decision-making and analysis features of the system, while the clerical staff need more focus on how to perform their jobs. But all the users must be trained in the ERP basics, overview of the system and its working, how an action by an employee triggers a host of events through the organization, how automation will help, what processes are changed and so on.
When the employees do not understand what the new system is and what it is supposed to do and how to operate it, they will not use it or use it incorrectly. This can lead to failure of the system. Train process owners (department managers) in how to use the system. Have them train the users.

    >> Inadequate requirements definition : If the requirements of the new system or what is expected from a new system are not adequately defined, then the implementation team will find it very difficult to plan the project. Only if the requirements are specified correctly, the ERP package that is best suited can be selected.

    >> Inadequate resources : ERP implementation is a complex, costly and lengthy project. The initial budgets are very often exceeded and there are still many hidden costs in an ERP implementation. So, while preparing the budget and allocating resources for the ERP implementation care should be taken to consider all the factors that could affect the costs, manpower requirements, infrastructure needs and then reserve a reasonable amount of buffer of buffer for any contingencies that might occur during implementation.

    >> A poor fit between the software and users procedures : If the selected package is a poor fit then either the organization has to change its business processes or the package has to be customized to follow the organization's processes. If the company's processes are efficient and cannot be changed the only option is to customize. This is a time-consuming, costly and error-prone process. So while selecting the ERP package care should be taken to select a package that offers the best fit with the company processes.

    >> Unrealistic expectations of the benefits and the ROI : ERP systems are capable of producing dramatic productivity improvements if successfully implemented and properly operated. But expecting ERP to perform miracles will be asking for trouble. The management and employees should be made aware of the benefit so that there are no over expectations. If ERP is touted as a panacea, then there will be dissatisfaction and disappointment about it, which can lead to failure of the system.

    >> Poor ERP package selection : If the right package - the one that is best suited for the company - is not selected, it will create a lot of problems for the implementations and customization teams as well as the end-users and will result in failure. Choosing an ERP package that is not suited for the company or one that will require huge amounts of customization is one of the major factors that contribute to the failure of the ERP project. So the package selected should be one that addresses the basic business functions of the organization.

    >> Extensive customization : Be prepared for people to argue that they need to customize a report or tell you that your new software does not accommodate the way your company pays invoices. However, you should always challenge those arguments aggressively. Most companies can live with standard business processes. When you over-customize an ERP installation, you not only add time and costs, you also make installing the next release of the ERP software increasingly difficult and costly.

    >> Change management : Long and expensive customization efforts often result in the lapse of the release deadline and budget overrun. Customizations make the software more fragile and harder to maintain when it finally goes to production. Major changes may be required in the later stage of the implementation as a result of incomplete requirements and power struggles within organizations.

    >> Failure of accommodating evolution of business processes : Business process fall into three levels - strategic planning, management control and operational control. Organizations continuously re-align their business processes at all levels in response to the ever-changing market environment. Many ERP systems are not flexible enough to accommodate evolution of business processes. An ERP system that worked well last year may need major overhaul.

Courtesy : ERP Demystified by Alexis Leon. Published by Tata McGraw Hill